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Surging prices for U.S. services driven by high demand aren't likely to slow in the near future as the supply of materials and labor remains insufficient, ISM survey chair Anthony Nieves told MNI Wednesday.

"The question is whether or not we're seeing strong inflation," he said. "We just have such strong demand that it's affecting the pricing and we just don't have the output necessary" to accommodate it.

Prices accelerated in April, with the ISM prices index up 2.8 percentage points to 76.8, the highest reading since 2008. The overall ISM Services PMI fell to 62.7, just slightly below last month's all-time high of 63.7.

Nieves said the rising cost of fuel, which has grown "tremendously" over the past three months, is a main driver of price increases within the service sector, which relies heavily on trucking and deliveries. Materials like lumber and some metals are also in short supply while demand remains elevated, driving up prices for end products that require them.


The employment index rose 1.6 percentage points to 58.8, though that could have been stronger if the labor pool was larger, he said, with some industries still struggling to fill open positions despite high unemployment.

Many unemployed workers are still sitting out until it's "safe to go back" to work, he said, opting to collect unemployment rather than risk exposure to Covid at an in-person job. That's dragging down service-sector productivity.

The construction industry has "slowed down" work on commercial projects as it scrambles for skilled workers, Nieves said, and the restaurant industry, hit particularly hard by pandemic shutdowns last year, is now struggling to reopen in part because eateries are unable to find staff.

Nieves said the employment picture will be clearer in next month's report, as all U.S. adults without a qualifying medical condition only became eligible to receive a Covid-19 vaccine on April 19, at the tail end of the ISM's data collection period.